Correlation Between US Bancorp and Mercantile Bank
Can any of the company-specific risk be diversified away by investing in both US Bancorp and Mercantile Bank at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining US Bancorp and Mercantile Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Bancorp and Mercantile Bank, you can compare the effects of market volatilities on US Bancorp and Mercantile Bank and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in US Bancorp with a short position of Mercantile Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Bancorp and Mercantile Bank.
Diversification Opportunities for US Bancorp and Mercantile Bank
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between USB and Mercantile is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp and Mercantile Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercantile Bank and US Bancorp is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on US Bancorp are associated (or correlated) with Mercantile Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercantile Bank has no effect on the direction of US Bancorp i.e., US Bancorp and Mercantile Bank go up and down completely randomly.
Pair Corralation between US Bancorp and Mercantile Bank
Considering the 90-day investment horizon US Bancorp is expected to under-perform the Mercantile Bank. But the stock apears to be less risky and, when comparing its historical volatility, US Bancorp is 1.3 times less risky than Mercantile Bank. The stock trades about -0.07 of its potential returns per unit of risk. The Mercantile Bank is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 4,468 in Mercantile Bank on November 28, 2024 and sell it today you would earn a total of 305.00 from holding Mercantile Bank or generate 6.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
US Bancorp vs. Mercantile Bank
Performance |
| Timeline |
| US Bancorp |
| Mercantile Bank |
US Bancorp and Mercantile Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Bancorp and Mercantile Bank
The main advantage of trading using opposite US Bancorp and Mercantile Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Bancorp position performs unexpectedly, Mercantile Bank can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Mercantile Bank will offset losses from the drop in Mercantile Bank's long position.| US Bancorp vs. PNC Financial Services | US Bancorp vs. KeyCorp | US Bancorp vs. Zions Bancorporation | US Bancorp vs. Fifth Third Bancorp |
| Mercantile Bank vs. Great Southern Bancorp | Mercantile Bank vs. First Bancorp | Mercantile Bank vs. MidWestOne Financial Group | Mercantile Bank vs. Lakeland Financial |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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